Navigating the constant drizzle of media admiration for President Biden’s love for the leaders of the Group of Seven in Europe was challenging, but a ga-ga statement from French President Emmanuel Macron caught my eye: “I think it is It’s great to have a US President in the club who is very cooperative. “
The conventional interpretation of Mr Biden’s trip to Europe is that the US, in contrast to the always belligerent Donald Trump (whom the current president has called off by name in front of the global media), is re-joining the club of multilateralism, making diplo-speaking and doing deals like the Paris climate agreement and the Obama-Biden-European nuclear deal with Iran, or the World Health Organization a repeat of its non-investigation into the origin of the coronavirus.
Still, I don’t think that explains what the discerning Mr. Macron meant by welcoming Joe Biden to the “Club”.
The club Mr. Biden joins – for all of us at home – is one that the US has stayed out of since World War II. This is the club known as the European welfare state.
It is the government-led system of lifelong paternalism established by the nations of Western Europe after 1945. Maintaining this welfare infrastructure with taxes and debt preoccupies its leaders with virtually every waking moment. As Mr Macron could say, it is Europe’s raison d’etre today.
Public welfare has never been America’s reason for existence, despite our substantial spending on social assistance programs. Despite the claims created by the New Deal by FDR and the Great Society by LBJ, the USA, in contrast to Europe, has remained a nation that is driven and led by capitalist initiative.
This fact is anathema to the current generation of Democrats. During Obama’s presidency in particular, left-liberal democrats expressed their open admiration for the welfare-oriented economic models in Germany and the Scandinavian countries, particularly Sweden.
This is the “club” the Biden Democrats want to join on their $ 6 trillion spending and tax agenda. The White House factsheet describing the American Families Plan apologizes for not already being a member: “The United States is one of the few countries in the world that does not guarantee paid vacation.” Plan also guarantee permanent payments for childcare, pre-kindergarten and community college.
Mr Biden’s most significant achievement during the G-7 meeting was not the agreement to “consult” with China. It was the commitment to an international minimum corporate tax rate of 15%. The EU’s art term for this is tax harmonization.
It is well known that harmonization is a euphemism to prevent EU states from competing on tax rates, such as Ireland’s economic success with a corporate tax rate of 12.5%, which is well below the German 30%.
The March business stimulus bill already had one foot in the business club of Europe: It expressly forbids any US state that has accepted the federal funds to use the money to lower tax rates. Spend more, yes; Lower taxes, never. An “harmonization” in the EU style has arrived in America.
Federal government’s net spending as a percentage of gross domestic product will reach a post-war high of almost 33% in 2021. And I don’t mean the Afghan war. The claim of federal net spending on GDP has not been so high since 1945 (41%). In Europe, post-war domestic spending quickly reached these highs. Today it consumes 62% of GDP in France, 51% in Germany and 53% in Sweden – three of the most admired European social models of the American left.
In recognition of the dangers posed by the ever-increasing national debt, the EU, when it was founded in 1993, placed limits on national deficits and debt. Europe’s fig leaf of budget discipline fell away in 2003 when the spending limit was exceeded by two of the leading nations in the Confederation, Germany and France.
Europe became famous for its eternal tax machinery that suppressed the continent’s entrepreneurial instinct. In addition to income taxes, Europe is heavily reliant on the collection of the notoriously high VAT (one reason why Europeans who buy luxury goods travel around the US).
An analysis by the Urban-Brookings Tax Policy Center found that the total tax revenue of all US governments as a percentage of GDP is 24%, compared to an average of more than 40% in seven European countries, and then adds, “But these countries generally offer more government services than the United States. ”We will be there shortly.
These European tax levels will never go down. Your governments must have the money. Mr Biden claims his proposed $ 3 trillion tax hike will only affect businesses and “the richest.” But if its claims become law, middle-class European taxation – perhaps a VAT or a carbon tax – is inevitable. Mr Biden’s plans to step up the Internal Revenue Service audits form the basis for this.
Presumably one of Donald Trump’s offenses against attachment to Europe was insisting that NATO members increase defense spending to over 2% of GDP. Forget it. Feeding the welfare throat killed European self-defense years ago. Biden’s budget only increases defense spending by 1.6%. Adjusted for inflation, this is a cut.
Mr. Biden went to Europe as America’s President. After this week he’s also EuroJoe.
Write to henninger@wsj.com.
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